Legal granting rights and A&M approach in Albanian HPP

Albanian total installed capacity in hydropower has reached at 2100 MW. Further, projects granted, but yet not developed, at 1785 MW and the hydropower potential studied, still unexploited, at around 615 MW. Therefore, in a synthesis, considering the theoretical potential by 4500 MW, today only 46% are exploited. As it is worth noting that the country can offer one of the lower cost of production (LCOE) of hydropower in the region.

Therefore, taking into consideration the large number of awarded projects but still not developed, in this analyse, firstly, based in my daily empirical experience, it will concentrated in a briefly analysis of the legal framework on procedures to obtain a HPP, for the better understanding of the complexity of an A&M and the approach needed to address it by interested developers.

Then starting with the explorer of the framework in which base the granting rights of hydropower investments, in summary, there are basically two procedures, and a third one is emerging, on the rights of granting of hydroelectric sources. Firstly, the authorization procedure is followed for the project up to 2 MW, considered as small investments and fundamentally of interest to local investors. A framework based on the principle that leaves the great load (or major risk) of the work to be followed by the investor. However, on the other hand its approval within the ministry is perceived as a fast procedure.

Then, for the most relevant projects, considering the level of difficulty and depending on the nature of the hydroelectric risk, are based on the regime of public-private partnership (PPP). What is necessary, from the already existing framework, is a qualified wise reflection of all the rights recognized by the law to the contract between the parties, based on the fact that the legal provisions governing the project contract provide clear guidance on the key issues that will be dealt, allowing the parties to freely negotiate the flexible terms of the concession contracts.

Based on the contractual conditions for plants up to 15 MW, the sale of energy generated by the operator is guaranteed through a long-term contract (PPA) for 15 years, signed with the operator charged of the public service obligation, with regulated tariffs, through a “feed-in” scheme, determine by an independent authority. The construction of power plant, that is subject from 15 to 20 permits and complex licenses of various bodies, it is secured and facilitated by the assumption and provisions as a co-responsibility of the public authorities.

Regard the third procedure, recently, the Ministry of Energy opened the tender for the selection of the bidder for the construction of the PV plant above 50 MW in the southern Albania. A first project based on pure principle of the capacity tender, which has been partially applied in many HPP projects at least over the last 2-3 years. Thus, it represents a large-scale innovation, where everything is prepared in the package by the public authority, giving the maximum support to investors interested. A practice thought to act as a model for further hydroelectric concessions.

As perceived by above procedures, consider the multi-importance for the economy and the complex challenges in their deployment in practice, the current legal framework has seen a continuous revision with the goal of improvement. Despite that, the importance of legal framework is in some way limited to the taken period of the sign of contract, and the core of investments in long term based on accurate technical studies. In addition, their preparation from the earliest stages is also crucial for gaining access to the financial system with a convenient interest rate.

Therefore, the development of sound technical studies, well above the minimum required by law, becomes fundamental. Normally their width and depth vary according to the relevance of the project. In any case, regardless of the technology used, or even the form of investment as an unsolicited proposal or capacity offer, the studies should provide sufficient technical, economic and financial reliability, as well as guarantees in its environmental and social impact.

In final of the above analysis, considering the high number of projects awarded but not yet realized, despite the continuous interest in the acquisition and transfer (A&M), the current situation shows all the complexity in this direction. The factors are different, where the legal procedure in the transfer rights first requires the consent of the public authorities, in the same form given for their approval. Furthermore, a problem is the reliability of the projects, if considers that a good one is sold by itself. In addition, it cost more in financial terms, as well as time and energy, because it necessitate the redo the evaluation along the entire chain. Then, finally, the general problem lies in the developers’ approach, as far they are way to what is request form whom is offered to manage renewable resources.

For more on above please find the related slides on Albania hydroelectric sector towards large and sustainable developments, kept by Dr Lorenc Gordani, at 2th Edition Summit “Hydropower Balkans 2018” organised by Vostock Capital, among 6-8 November 2018, at the Splendid Conference & SPA Resort, Budva, Montenegro.

Dr Lorenc Gordani, Independent Adviser in Energy Policy & Law, Regulation & Infrastructure in Albania
Dr Lorenc Gordani, Legal Adviser in Albania Energy Market*

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